Tanker Shipping Profitability Still A Way Off For Loss-Making Tankers As Pandemic Drags On

New virus mutations and outbreaks have slowed the recovery in global oil demand as some countries lock down again and international travel remains complicated.

Drivers of demand and freight rates

To say that the summer has not been kind to the crude oil shipping industry would be an understatement. Average earnings have dropped below USD 10,000 per day since June for all crude oil tankers, with many trades offering negative earnings; freight rates are not high enough to cover voyage expenses, let alone operating and financing costs. Daily average VLCC earnings on 3 September stood at USD 8,138. According to BIMCO estimates, a standard VLCC must earn around USD 25,000 per day to break even. The last time average VLCC earnings were above this level was at the end of December 2020. Earnings for Suezmax and Aframax tankers stood at USD 9,194 and USD 8,367 per day, respectively, on 3 September.

A clear indication of the currently low activity in the VLCC market is the lack of volatility in earnings. The difference between the highest and lowest average earnings in August was just USD 1,183.

Oil product tankers have registered more movement in earnings. LR2 earnings reached USD 19,102 per day on 3 September, while LR1 earnings reached USD 13,521 per day.

In terms of demand for seaborne transportation of oil products, volumes have risen by 22.4% in the first six months of this year compared to 2020, but at 508.2m tonnes, volumes are, however, 13.4% lower than in the first half of 2019. O....

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